July 2009

Industry Ethics: Going Beyond the Call of Duty

A seemingly endless stream of bad news about U.S. weapon programs should cause all of us to revisit our approach to ethics in the defense industry.

Last year, the Government Accountability Office sent shockwaves through the defense community when it reported $300 billion in cost overruns in 96 major weapons systems, which were on average 22 months behind schedule. These findings were reported by every major news media, including a recent New York Times editorial, titled, "Military-Industrial Redux."

Following these revelations of massive cost overruns, Congress embarked on new procurement reform legislation and the Defense Department announced the hiring of 20,000 civil servants for engineering and management jobs to tighten up oversight of acquisition programs. These measures should help to turn around the negative trends in program performance.

But these developments also should offer industry an opportunity to ponder the delicate balance of ethics, corporate profits, and national security.

There are many definitions of ethics and more than one code of ethics on the street. But there is always some minimum structural or process definition involved. The many codes that abound differ in specifics, but hew in general to some common minimum.

There is a tendency, too, to have a code or be part of an organization with a stated code that might serve as an inoculation against charges of unethical behavior. The line might go like this, "We couldn’t have stepped across the ethical line because we have an 'Ethics Code.'" The code in this case is treated as the Good Housekeeping Seal of Approval.

The NDIA code and the accompanying discussion of ethics (http://www.ndia.org/Resources/Pages/TheEthicsSource.aspx) lays out not only the actual code, but also references those of four of our members (Boeing, Day & Zimmerman, Lockheed Martin, Raytheon) as well as other ethics references from government and other industry organizations. This reflects our view that ethics is an open subject. No one has the corner on it and all should be invited to play vigorously.

The NDIA code takes as a given that companies and their boards have a fiduciary responsibility to profit, but that ethical behavior has to be on an equal or higher footing with profit as a corporate objective. The industry has an obligation to U.S. troops, to give them the highest quality systems, services, and training that is possible. Therefore, highest "ethical readiness" is a corporate priority. If ethics lag, the resulting excesses will drag down reputations, support to the troops, and eventually profits, too.

Lack of ethical readiness is a condition that our mission of supporting the nation’s war fighters can’t tolerate. For all of these reasons, NDIA believes that corporate ethics must be in the "job jar" of the CEO. He or she may have an ethics officer or department, but ethics leadership and standards must originate at the top. The principle that ethics is on a par with or higher than profit motive must be clearly communicated. Ethics can’t be sacrificed for short-term profits, or both ethics and profit will suffer in the long run.

Clearly, fraud is not only unlawful but also unethical. It may not be clear though, that waste and abuse fall into the ethical bucket, but they should. When waste and abuse are recognized, but not addressed, this also must be identified as an ethical transgression because they break the obligation that the industry has to the nation’s military forces to provide quality offerings.

In recent months, major adjustments to programs have been made and more are on the way. Now the industry must ensure that it takes every possible action to prevent waste and abuse from affecting program costs and schedule. Program management is a shared responsibility by the government-industry team. Industry should endeavor to shoulder at least 50 percent of the burden, stand tall even in the toughest circumstances, and efficiently deliver on program commitments and accurate reporting on critical aspects of program performance, regardless of whether the responsibility resides with government or industry.

I invite you to visit the NDIA Ethics Source and review not only our code of ethics, but also those of our members and other industrial partners.